CNBC's 'Squawk Box' discuss a recent Twitter poll from Tesla CEO Elon Musk asking users whether he should sell 10% of his shares in the company. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Tesla shares fell by more than 4% in early morning trading Monday after CEO Elon Musk asked his Twitter followers if he should sell 10% of his stock in the electric vehicle company.
Shares of Tesla slipped 4.2% to $1,170 at 8:19 a.m. ET Monday, down from $1,222.09 at market close on Friday. Earlier in pre-market trade on Monday, shares fell over 7%.
It comes after Musk asked his 62.5 million Twitter followers to determine the future of a chunk of his Tesla holdings.
In a Twitter poll launched Saturday, Musk said: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”
The billionaire gave people the option to vote “Yes” or “No” and pledged to abide by the results of the poll, whichever way it went.
Some 3,519,252 people responded, and 57.9% of them voted for “Yes.”
Musk previously said he was likely to sell “a huge block” of his shares in the fourth quarter.
In September, Musk said at the Code Conference in Beverly Hills, California, that his marginal tax rate will be over 50% when his stock options expire at Tesla, and that he was already planning to sell soon.
“I have a bunch of options that are expiring early next year, so ... a huge block of options will sell in Q4 — because I have to or they’ll expire,” he said.
Jefferies raised their price target for shares of Tesla from $950 to $1,400 in a note on Monday.
Analyst Philippe Houchois wrote: “Without dismissing execution risk, Tesla is getting to a position where it can balance affordability and speed, goals which are as important as profitability in Elon Musk’s vision.”
He added: “Tesla looks set to gain share from large OEMs [original equipment manufacturers], potentially claiming a disproportionate share of the industry profit pool in the coming 3-5 years as legacies enter the margin dilutive EV transition phase.”
Other current and former Tesla board members, including Robyn Denholm, Kimbal Musk, Ira Ehrenpreis and Antonio Gracias have also offloaded hundreds of millions of dollars worth of Tesla stock since Oct. 28, as the company’s stock soared on the Nasdaq stock exchange.
Shares climbed after Tesla posted a record third quarter and car rental company Hertz announced that it was ordering 100,000 Tesla vehicles for its fleet. Musk waited for a week after Hertz made its announcement to say that Tesla had not in fact signed a contract with the company yet. Prior to that statement, he taunted investors who were short shares of Tesla on Twitter, writing: “Tesla Hertz shorts.”
Since the Hertz announcement, Tesla shares have risen by more than 30% and so has Musk’s net worth.
Elon’s tax bill
No matter the results of the Twitter poll, Musk would have likely started selling millions of shares this quarter. That’s because he’s facing a looming tax bill of more than $15 billion.
His options expire in August 2022 but in order to exercise them, he has to pay the income tax on the gain.
Since the options are taxed as an employee benefit or compensation, they will be taxed at top ordinary-income levels, or 37% plus the 3.8% net investment tax. He will also have to pay the 13.3% top tax rate in California since the options were granted and mostly earned while he was a California tax resident.
Combined, the state and federal tax rate will be 54.1%. So the total tax bill on his options, at the current price, would be $15 billion.
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